- 18-12-2024

Loans remain stable in Belgium... for now

2 min

According to the National Bank of Belgium (BNB), Belgian growth remained stable in the third quarter, thanks to household consumption. However, investments from businesses and the construction sector contributed negatively to GDP growth. A closer look reveals that the surge in business investment, which began in mid-2022, came to an abrupt end at the beginning of 2024. Even after adjusting for a large investment project in the ICT sector, the underlying growth of business investment remained negative in the third quarter of 2024.

The BNB's interviews with businesses in October and November confirm that companies have reduced their investment spending in recent quarters to cut costs. However, they are prioritising targeted investments in operational efficiency, such as automation and digitisation, to cope with rising labour costs and labour shortages. Many businesses are also investing in sustainable technologies, driven by increasingly strict regulatory requirements.

Cooling down of the economic outlook

The European economic outlook has lost momentum since Donald Trump's re-election, leading to a decline in consumer and business confidence in Belgium. As countries try to estimate the impact of new protectionist measures, which will come into effect in 2025, even the most adventurous investors are becoming cautious.

Satisfactory growth in loan volumes

Despite the economic uncertainty, loan volumes in Belgium remain encouraging. At the end of October, the volume of loans to businesses still exceeded €150 billion. Although the volume has decreased by 1% over the past year, this is the first decline since spring 2021. The previous decline was largely due to technical factors, as the figures were distorted by comparisons to the unprecedented year of 2020. What is striking is the stability and good performance of loan growth to businesses and individuals over the past few years, despite interest rate hikes and the uncertain environment caused by the surge in energy prices.

2025 is expected to see interest rate cuts continue, particularly in Europe where the fight against inflation seems to be over. The question now is whether the small dip in loan issuance in October 2024 will become a new trend, driven by the "Trump effect" on Belgian business investment.